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Attorney and Birmingham commission member found liable in civil embezzlement case

Birmingham Mayor Pro Tem Stuart Sherman could pay more than $335,000 to Troy-based Jacob & Weingarten PC, after jurors found he had committed conversion and embezzlement from the law firm he worked for shortly before his departure a year ago.

Jurors in a weeklong civil lawsuit trial before Oakland County Circuit Judge Michael Warren made that finding Monday over a $112,745.22 check that Sherman, a shareholder and treasurer at the firm until December 2012, wrote to himself Dec. 26, 2012. That check, drawing on law firm funds at Huntington National Bank, is ostensibly “per (a) compensation formula,” at the firm, according to a handwritten memo note.

The circuit court jury also found the firm was entitled to treble damages in the case. Sherman told Crain’s that check represents only what Sherman believes he is entitled to under a law firm compensation formula that two other partners at the firm had attempted to change.

“Business disputes happen all the time. This is simply a partnership dissolution, and it should have been handled internally,” Sherman told Crain’s Tuesday about the verdict and his departure from Jacob & Weingarten.

“I took only what I believed what I was entitled to in that dispute, and the jury saw it differently. … Sometimes these things get uglier than divorces, and that’s unfortunate.”

The civil judgment in Oakland County is not a criminal conviction and is unrelated to Sherman’s role as pro tem of the Birmingham City Commission.

A central issue in the trial was attorney fees paid in Sherman’s representation of Barry Bess, an attorney at Southfield-based Seyburn Kahn PC who was removed as trustee of three trusts at Oakland County Probate Court by Judge Daniel O’Brien on Dec. 3, 2012.

Bess wrote several checks to the firm in late November totaling about $394,000 to the firm out of those three trusts, even though the trust beneficiaries had alleged breaches of fiduciary duty and had sought to have Bess removed as a trustee since 2011.

The firm later refunded that $394,000, and attempted to withdraw from representing Bess — although several other payments to Jacob & Weingarten are still in dispute before the Michigan Court of Appeals. O’Brien later appointed Jon Angell of Troy-based Angell & Co. PLLC to manage those trusts.

The attorney for the law firm in the dispute said Sherman acted in the opposite way he was instructed.

“This payment to himself (Sherman) was in contravention of what the firm’s board had told him. The management told him this wasn’t exactly the most ethical circumstance for receiving payment and we may have to return this money, or be sure we have court approval for this,” said Kenneth Neuman, partner at Birmingham-based Neuman Anderson PC and attorney for the Jacob & Weingarten firm at trial.

“The probate court ruled the money was improper and all of it had to be returned. And my client’s decision, in saying we’re not going to pay you (to Sherman), was contravened.”

Sherman contends the Bess payments from the probate trusts are a “red herring” attempt by the law firm to turn the partnership dispute into a case for professional misconduct. He said he is reviewing the jury verdict with attorneys and considering whether to file an appeal.

Ken Silver, shareholder at Bloomfield Hills-based Hertz Schram PC representing the trust beneficiaries, said the fee payments to Jacob & Weingarten were all improper and the trusts are entitled to recover the other payments. He said he considers the Dec. 26 check to Sherman “an internal matter” between Sherman and the firm, but the beneficiaries could seek to make a claim against any sum the firm recovers from Sherman.

The trusts have obtained a judgment requiring the firm to return the other payments made to Jacob & Weingarten, but the firm appealed, he said.

“Although the firm, Jacob & Weingarten, was consistently adverse to our interests, in terms of our actions with the attorney fee payments, I’ve never asserted in pleadings that Jacob & Weingarten as a firm did anything inappropriate,” he said.

Howard Sher, vice president at Jacob & Weingarten, did not return phone calls seeking comment about the verdict Tuesday. Mayer Morganroth, an attorney for Sherman at Birmingham-based Morganroth & Morganroth PC, and Angell as trustee also did not immediately respond to requests for comment.